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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1500.00 | ACUITE AA- | Stable | Upgraded | Positive to Stable | - |
| Non Convertible Debentures (NCD) | 100.00 | ACUITE AA- | Stable | Assigned | - |
| Non Convertible Debentures (NCD) | 50.00 | ACUITE AA- | Stable | Upgraded | Positive to Stable | - |
| Non Convertible Debentures (NCD) | 75.00 | PP-MLD | ACUITE AA- | Stable | Upgraded | Positive to Stable | - |
| Commercial Paper (CP) | 100.00 | - | ACUITE A1+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 1825.00 | - | - |
| Rating Rationale |
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Acuité has assigned the long term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 100.00 Cr. Proposed Non-Convertible Debentures of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook is 'Stable'.
Acuité has upgraded the long term rating to ‘ACUITE AA-’ (read as ACUITE double A minus) from ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 1500.00 Cr. bank facilities of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook is revised from 'Positive' to 'Stable'. Acuité has upgraded the long term rating to ‘ACUITE AA-’ (read as ACUITE double A minus) from ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 50.00 Cr. Non-Convertible Debentures of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). The outlook is revised from 'Positive' to 'Stable'. Acuité has upgraded the long term rating to ‘ACUITE PP-MLD AA-’ (read as ACUITE Principal Protected Market Linked Debentures double A minus) from ‘ACUITE PP-MLD A+’ (read as ACUITE Principal Protected Market Linked Debentures A plus) on the Rs. 75.00 Cr. principal protected market linked debentures of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL).The outlook is revised from 'Positive' to 'Stable'. Acuité has reaffirmed the short term rating of ‘ACUITE A1+’ (read as ACUITE A one plus) on the Rs. 100.00 Cr. proposed commercial paper of Protium Finance Limited (PFL) (erstwhile Growth Source Financial Technologies Private Limited) (GSFTPL). Rationale for upgrade The rating upgrade takes into consideration the increase in profitability and sustained growth in AUM, consistent growth in disbursements and stable asset quality of the company. PFL reported improvement in PAT for FY23 which stood at Rs. 63.13 Cr. as against Rs. 13.96 Cr. for FY22 and Rs. 0.42 Cr. in FY21. The RoAA improved to 2.64 percent for FY23 (P.Y: 1.17 percent). The rating also factors in PFL’s efficient risk management systems along with high level of digitization and collection processes as reflected in its overall on-time portfolio of 97.17 percent as on June 30, 2023 with an average collection efficiency of over 97.78 percent for six months ending August-23. PFL's disbursements momentum has seen significant traction with Rs. 3,141 Cr. disbursed for FY23 (P.Y: 1,857 Cr.). Till August-23, the company has disbursed Rs. 1,836 Cr. surpassing previous year levels. The rapid disbursements and branch expansion led to increase in loan portfolio which grew to Rs. 2908 Cr. as on March 31, 2023 from Rs. 1415 Cr. as on March 31, 2022. The AUM as on August 31, 2023 stood at 3,824 Cr. The rating continues to factor in PFL’s experienced management, healthy capital structure and support from marquee investors. PFL is wholly owned subsidiary of Consilience Capital Management; funded and backed by marquee global investors. As on June 30, 2023, the company reported networth of Rs. 1,358 Cr. (limited review) and Capital Adequacy Ratio (CAR) stood of 46.61 percent. The demonstrated growth in loan portfolio and extensive experience of the management in financial services has enabled PFL recently, to raise funds from banks at competitive rates. The rating, however, remains constrained by limited track record and low portfolio seasoning (majority of portfolio origination taken place in FY2022 & FY2023) and moderate granularity of the portfolio. The OPEX increased to 9.71 percent for FY23 as compared to 8.47 percent for FY22. The increase in OPEX is majorly due to the increase in staff expenses and other operating expenses incurred as a result of expansion. Further, the rating is constrained by the inherent risks of lending towards MSME segment. Going forward, the ability of the company sustain its growth momentum while keeping the OPEX and credit costs under control will be key credit monitorable. |
| About the company |
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Incorporated in 2019, Protium Finance Limited (PFL) erstwhile Growth Source Financial Technologies Private Limited (GFSTPL) is a Mumbai based NBFC engaged in lending secured and unsecured loans to MSME and Consumer finance segments. The company is promoted by Consilience Capital Management and led by Mr. Peeyush Misra (MD & CEO) who has over 2 decades of experience in risk management and running global businesses. PFL operates through a network of 88 branches spread across 75 districts/cities and having a presence in 17 states as on June 30, 2023.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of PFL to arrive at the rating.
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Key Rating Drivers
| Strength |
| Experienced management team; demonstrated support from marquee investors
PFL extends secured & unsecured loans towards MSME segments. The company also extends consumer finance loans through their channel partners. PFL is promoted by Consilience Capital Management which is backed by marquee global investors. Over the past two years of operations, PFL has received continuous support in the form of periodic capital infusion from the promoter company and are expected to support the growth plans as and when required. Consilience Capital Management have in total contributed around ~Rs. 1,255 Cr. in the form of equity and CCPS since FY2020. PFL is led by Mr. Peeyush Misra (MD & CEO) who has an experience spanning over two decades in risk management and running global businesses. He was earlier associated with Goldman Sachs (U.S.) as a Partner handling business including mortgages, asset backed securities, interest rate products amongst others. Mr. Peeyush is supported by other seasoned professionals like Mr. Amit Gupta, current CFO, who has more than two decades of experience in Indian financial services industry. PFL has also on board Mr. P R Seshadri (ex- MD & CEO Karur Vysya Bank; ex CEO BFC Bank & Citi Financial Consumer Finance) and Mrs. Anuradha Rao (ex-deputy MD; Strategy and Chief Digital Officer SBI; ex-MD & CEO of SBI Funds Management) acting as Independent Directors bringing in over 3 decades of experience in financial services industry. The management team also comprises of professionals with experience in SME, Consumer, Retail lending, Treasury & Risk Management, Fintech and Investment Banking. Acuité believes that PFL’s business and credit profile over the near term will be supported by its ability to attract funding from diversified lenders/investors and confidence imposed by the investors in the business model of the company. Healthy growth in AUM and sound asset quality PFL commenced its business in February 2020. Over the years the company has expanded its presence in 17 states with its network of 88 branches spread across 75 districts/cities as on June 30, 2023. PFL has been identifying geographies suited to its loan products and expanding rapidly with opening new branches and engaging with channel partners. The company’s business sourcing model is a mix of branch led origination, via DSAs and partner origination. The company disbursed loans amounting to ~Rs. 382 Cr. in FY2021 and ~Rs. 1857 Cr. in FY2022. The disbursements for FY23 improved to Rs. 3141 Cr. The rapid branch expansion fuelled by disbursements has helped PFL to grow its loan portfolio to Rs. 2908 Cr. as on March 31, 2023 from Rs. 1415 Cr. as on March 31, 2022, and ~Rs. 321 Cr. as on March 31, 2021. The growth in loan portfolio was primarily funded by capital funds deployed by the company but PFL do have a diverse funding mix by accessing funds from Banks and NBFC/FI’s. The company has existing relationships with over 35 lending institutions as on August 31, 2023. PFL’s healthy asset quality was marked by overall on time portfolio at 97.78 percent and GNPA at 0.88 percent as on June 30, 2023. Overall average collection efficiency stood over 97 percent for six months ending August-23. Acuité expects PFL to maintain the growth momentum in a sustainable manner while diversifying its resource mix and maintaining asset quality. |
| Weakness |
| Susceptible to inherent risks amidst relatively low seasoned portfolio
PFL commenced its lending operation in February, 2020 extending MSME loans (secured against property) having a tenure of 10 years. The company also extends unsecured MSME loans having shorter tenure upto 3 years. PFL’s shorter duration loans also includes loss protected MSME and consumer finance loans through their channel partner having a tenure ranging 1.5-2 years. The company’s loan book of Rs. 2908 Cr. as on March 31, 2023 has grown significantly from Rs. 1415 Cr. as on March 31, 2022 and Rs. 321 Cr. as on March 31, 2021. Due to substantial growth in loan book in the last two years, majority of the portfolio has a seasoning of around 1-2 year as on March 31, 2023. Around 70.32 percent of PFL’s portfolio as on August 31, 2023 accounts for MSME loans (secured against property) and 26.76 percent towards unsecured MSME loans. PFL’s overall credit profile is susceptible to concentration towards MSME loans which in turn are facing their own inherent risks and challenges. Further, since MSME loans are extended to self employed individuals for business purposes, the serviceability of these loans is directly dependent on the level of economic activity in the region. The company’s operations are fairly diversified in Maharashtra with ~19 percent followed by Tamil Nadu with ~15 percent of the overall outstanding portfolio as on August 31, 2023. Occurrence of events such as slowdown in economic activity or shifting of activity to other geographies could impact the cash flows of the borrowers, thereby impacting credit profile of PFL. Relatively low seasoning of portfolio with inherent risk associated with MSME lending might result in increased asset quality pressures due to current operating environment. Acuité believes that the company’s ability to maintain its asset quality given the low seasoned loan book and increased presence in the newer geographies will remain a key rating monitorables. |
| ESG Factors Relevant for Rating |
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Protium Finance primarily lends to MSMEs. Some of the material governance issues for the financial services sector are policies and practices with regard to business ethics, board diversity and independence, compensation structure for board and KMPs, role of the audit committee and shareholders’ rights. On the social aspect, some of the critical issues for the sector are the contributions to financial inclusion and community development, responsible financing including environmentally friendly projects and policies around data privacy. The industry, by nature has a low exposure to environmental risks.
The entity maintains adequate transparency in its business ethics practices as can be inferred from the entity’s disclosures regarding related party transactions, vigil mechanism and whistle blower policy. The board of directors of the Protium comprise of 2 independent directors out of a total of 3 directors. The audit committee formed by the entity majorly comprises of independent directors with the objective to monitor and provide an unbiased supervision of the management’s financial reporting process. Protium also maintains transparency in terms of disclosures pertaining to interest rate policy and its adherence to Fair Practice Code as disseminated by Reserve Bank of India's circular. |
| Rating Sensitivity |
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| All Covenants |
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PFL is subject to material covenants pertaining to gearing levels, GNPA and NPA levels and shareholding levels as per term sheets given by different lenders.
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| Liquidity Position |
| Adequate |
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The company reported no negative cumulative mis-matches in near to medium term as per ALM statement dated June 30, 2023. PFL’s liquidity position is adequate with overall liquidity levels of Rs. 503 Cr. including cash and bank balances of Rs. 96.97 Cr. and FD balances/liquid investments of Rs. 406.21 Cr. as on June 30, 2023.
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| Outlook: Stable |
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Acuité believes that PFL's will maintain a 'stable' outlook for the medium term, as the credit profile will be supported by its experienced management, support from resourceful promoters’/investor base and healthy capitalisation levels. The outlook may be revised to ‘Positive’ in case the company is able to scale up its loan book significantly while maintaining its asset quality and profitability metrics. Conversely, the outlook may be revised to ‘Negative’ in case of significant deterioration in asset quality/profitability metrics.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Net Interest Income plus other income.
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| Status of non-cooperation with previous CRA (if applicable): |
| Not applicable |
| Any other information |
| Not applicable |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm • Commercial Paper: https://www.acuite.in/view-rating-criteria-54.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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